Types Of Family Firms Research Articles

How Does Diversification Strategy Differ among Different Types of Family Firms?

Research suggests that family firms diversify less than nonfamily firms do. However, once family firms decide to diversify, are they more likely to prefer related or unrelated diversification? The ...

A Taxonomy of Family Firms based on Family Values: Setting the Scene

So far results regarding the specific influence of family values to family firm success are inconclusive. In order to solve the puzzle, we account for family firm heterogeneity and we develop a taxonomy of family firms based on family values. Using values theory, we identify six value categories that help to discriminate between family firms, resulting in five family firm types with five distinct value profiles. These family firm types differ in the importance placed on each value category and thus help us to better understand the heterogeneity among family firms and serve as a first stepping stone for future research aimed at a more differentiated discussion on family values and their impact on family firm success.

How family influence, socioemotional wealth, and competitive conditions shape new technology adoption

Research summary: In family businesses, investment decisions often involve both socioemotional wealth and economic considerations. Focusing on new technology adoption, we argue that multiple dimensions of socioemotional wealth contribute to complex effects within different types of family firms—depending on the level of family control—as well as in contrast to non‐family firms. Results based on cable TV operators from 1983 to 1987 confirm that family ownership correlates negatively with technology adoption, especially when family owners hold a minority rather than majority position. We also show contingencies based on performance improvements and competitive threats. Our arguments contribute new insights about the tensions between economic and socioemotional factors within minority family ownership that are absent from non‐family firms and more pronounced than in majority family firms.Managerial summary: We find evidence of greater reluctance toward new technology adoption among firms with minority family influence than majority family influence. This suggests that goals related to socioemotional wealth only partly explain the cautious decision‐making observed in family firms, with further caution arising from conflicting priorities between family and non‐family owners. Recent performance improvements help offset the reluctance to adopt new technology, albeit to a lesser degree among firms with minority family ownership. High levels of competitive threats also offset the reduction in new technology adoption, and contrary to expectations, to a greater extent among minority family firms. Copyright © 2016 John Wiley & Sons, Ltd.

“Where do you want to take your family firm?” A theoretical and empirical exploratory study of family business goals

Family business scholars assume that family business goals represent the nature of the firm's decision making and are driving forces (i.e., antecedents) of family firm behavior, performance, continuity, competitiveness, and sustainability. Without measuring family business goals, family business research—specifically, the family business theorizing process—is floating in the midst of assumptions used to justify observational descriptive data, such as differences between family and non-family firms and differences among various types of family firms. There remains a lack of clarity surrounding the theoretical definition of family business goals and an absence of methodological approaches to make the concept operative. In order to address this gap, this research applies an exploratory step-by-step methodology that combines both a theoretical and an empirical approach. First, following an inductive literature review, I theorize family business goals as a multidimensional concept combining two scales: economic versus non-economic orientation and family versus business orientation. Second, by using a unique Spanish database of family business, I use the partial least squares structural equation modeling method to confirm and extend the proposed theoretical multidimensional concept of family business goals.

Earnings management in family firms: current state of knowledge and opportunities for future research

Purpose– This paper aims to synthesize the extant research on earnings management in family firms.Design/methodology/approach– The paper reviews the current state of knowledge about earnings management in family firms, identifying the main theoretical frameworks used in the empirical research on the topic, as well as the main types of said research and its findings.Findings– Agency theory is identified as the main theoretical framework used. Two major types of research identified in the literature are discussed, namely, earnings management in family firms versus non-family firms and earnings management in different types of family firms.Originality/value– Important research gaps are identified, and future research priorities are suggested. These pertain to the lack of research on earnings management in different types of family firms, the utility of using qualitative and experimental research, as well as the importance of using theoretical frameworks better able to capture the peculiarities of family firms.

Ownership Structure and Mergers and Acquisitions Decisions: Are Family Firms Different Acquirers?

This study investigates the relationship between ownership structure and mergers and acquisitions (M&A) decisions for a comprehensive sample of 195 companies listed on the Swiss Exchange for the period 2003-2013. It examines: whether different ownership structures influence the probability of engaging in M&A, whether different ownership structures influence the characteristics of M&A deals, and the value assigned to such operations surrounding the announcement date. This paper focuses on family firms and analyzes the association between several characteristics (generation, involvement in the management, and the presence of just one family member as shareholder) and the M&A.The results show that family firms engage less in M&A and prefer cash deals and diversified deals. This result is driven mainly by family firms whose power is the least contested. Moreover, family firms at the descendant stage care more about diversification than those at the founder stage. Family firms have a nonlinear (convex) association with value creation when it comes to M&A and only those with significant family ownership generate higher abnormal returns. However, investment decisions made by some types of family firms (i.e. those with several members or those not involved in management) are negatively perceived by market participants.

Setting the right mix—Analyzing outside directors’ pay mix in public family firms

Outside directors’ pay mix determines if and to which extent a firm's designated monitor is incentivized by means of performance related (PR) pay. Owning families of public firms, still having substantial influence on the compensation process, need to balance the family's genuine interest against PR pay and non-family stakeholders’ contrasting preferences in setting the right mix. At first, family and non-family firms show no difference regarding the adoption of PR pay. However, among PR pay adopters, we find family firms to devote greater shares to this pay component, thus sacrificing part of their socioemotional wealth in order to meet stakeholders’ demand. A differentiation between different types of family firms reveals that especially true family firms, i.e. firms managed or owned by at least two family members, account for this particular behavior.

Accrual-Based and Real Activities Based Earnings Management Behavior of Family Firms in Japan

We have explored the extent of accrual-based and real activities-based earnings management using data from family and non-family firms in Japan. Family firms are expected to have lower agency costs because family shareholders and management are more congruent in their pursuit of mutual firm goals and seek lower levels of earnings management. However, this collusion may lead to entrenchment and higher levels of earnings management, which becomes opaque to outside shareholders. A founding family is concerned with the reputation of their firm for sustained socioemotional wealth and family firms may conduct cosmetic earnings management to conceal bad news. We empirically assess the levels of earnings management and investigate whether the level will be lower or higher for family or non-family firms, and identify which method is more costly. The level of accruals and cost may vary among the family firm types; that is, whether or not shareholdings are large or the CEO is from the founding family. We find that the level of both accrual-based and real activity measures is lower for family firms. With cross-section regressions, we find that family shareholding increase the level of abnormal accruals management, whereas the family CEO decreases the level of abnormal accruals, but in both cases the amounts were not significant. We also find that family-related variables decrease the levels of real-activities earnings management. When we introduce economic measures related to the costs of earnings management, we find that Japanese family firms utilize accrual-based earnings management more often than real activities-based earnings management.

An explorative study on family firms and open innovation breadth: do non-family managers make the difference?

The degree of openness in innovation is a key strategic decision of family firms (FFs). Although there is an increased interest in studies on FFs and open innovation (OI), the existing knowledge is rather limited. This study explores the determinants of OI in FFs. We focus on two distinctive types of FFs: those held and managed by family members and FFs where ownership and management are disjointed, leading to non–family managers being involved in strategic decision–making. Our study shows that FFs managed by non–family managers are motivated by an innovation strategy that is more aggressive, more oriented towards technological excellence and radical innovation as compared to FFs managed by family managers. And they are more likely to search for a broader set of external sources in embracing OI. We argue that the presence of non–family managers is what makes the difference in shaping firm behaviour in terms of OI breadth.

Family Enterprise and Context

There has been increasing attention to the heterogeneity of family businesses but recognition of the heterogeneity of the contexts in which family firms operate is only now emerging. The articles and commentaries in this special issue contribute to the understanding of some of the institutional and organizational contexts in which family businesses operate and the impact of this variety on their behavior, strategies, and performance. We discuss the importance of context and questions for future research that deal with the interrelationships between different contexts and the behaviors of different types of family firms.

Family Firm Heterogeneity and Governance: A Configuration Approach

Family involvement in ownership and management of business varies significantly within family firms. Although the literature recognizes the diversity in family firms, it remains unclear what governance mechanisms are most appropriate to achieve prioritized performance goals of different types of family firms. By combining two established categorizations of family involvement in firm ownership and management, nine types of family firms are identified. Drawing on the configuration approach, we theorize the governance mechanisms likely to most efficiently address the incentive systems, authority relations, and norms of legitimization in each of these types of family firms.

Earnings Management in Family Firms: Current State of Knowledge and Opportunities for Future Research

This paper synthesizes the extant research on earnings management in family firms. It reviews the current state of knowledge about this phenomenon, identifying the main theoretical frameworks used in the empirical research on the topic, as well as the main types of said research and its findings.Agency theory is identified as the main theoretical framework used. Two major types of research identified in the literature are discussed, namely earnings management in family firms versus non-family firms, and (2) earnings management in different types of family firms. Important research gaps are identified, and future research priorities are suggested. These pertain to the lack of research on earnings management in non-listed family firms and analyzing the realities of less developed countries, as well as the importance of using theoretical frameworks batter able to capture the peculiarities of family firms.

Is family leadership always beneficial?

There has been much debate concerning the performance of family firms and the drivers of their performance. Some scholars have argued that family management is to blame when family firms go wrong; others claim that family management removes costly agency problems and encourages stewardship. Our thesis is that these disagreements can only be resolved by distinguishing among different types of family firms. We argue that family CEOs will outperform in smaller firms with more concentrated ownership and underperform in larger firms with more dispersed ownership; they will do neither where firms are smaller and ownership is more dispersed or firms are larger and ownership is more concentrated. Copyright © 2012 John Wiley & Sons, Ltd.

Exploring value differences across family firms: The influence of choosing and managing complexity

Stewardship is considered a distinctive feature of family firms, and it is associated with a set of values, including altruism, collectivism, trust, identification, loyalty and commitment. However, the extent to which these values actually prevail in different types of family firms has not often been explored, especially in relation to the types of complexity found in family firms. In this study, we address this gap in the literature and explore the existence of potential differences among family firms. Additionally, we investigate the possible reasons for these differences with regard to the levels of management complexity in the family firms and the processes related to such complexity, such as succession, pruning and complexity management options. We use a multiple case-study methodology involving 22 long-established family firms in northeast Spain. Based on the empirical results from our dynamic and multidimensional approach, this article primarily contributes to the existing literature by providing a conceptual model of the influence complexity has on values in family firms.

Family Firm Types Based on the Professionalization Construct

This article responds to the calls from the research field to find effective ways to distinguish between different categories of family firms. The authors contribute to this literature by extending and refining previous family firm typologies. To attain this objective, the authors introduce the professionalization construct as basis for distinguishing family firms. As this construct is often approached in an oversimplified, one-dimensional manner, they first conduct an exploratory factor analysis to reveal its multidimensional nature. Based on these results, drawn from a representative sample of 532 Belgian family businesses, a cluster analysis facilitates a distinction between different “types” of family firms based on a multidimensional conceptualization of firm professionalization.

Ideal types of family business management: Horizontal fit between family and business decisions and the relationship with family business performance

Despite considerable progress made using systems and configurative approaches in family business research, current knowledge remains limited on how different combinations of organizational attributes determine relevant outcomes and, therefore, how family affects businesses. To address this question, we focus on the overlap between family and business at management and governance levels. We posit that family- and business-oriented decisions emerge in four areas: board of directors, succession, human resources, and strategic process. This argument allows us to conceive three ideal types of family firms that yield maximum family firm performance, by considering the way that family firms adjust their orientations in their decisions. Building on a sample of 732 privately owned Spanish family firms, we propose the following main hypothesis: the greater the similarity of a family firm to an ideal profile, the better its performance. Our main results show that family firms can achieve successful business results by using a combination of family and business orientations in their decision making.

Entrepreneurial Orientation: Assessing the Construct's Validity and Addressing Some of Its Implications for Research in the Areas of Family Business and Organizational Learning

Our commentary addresses three papers that we believe make important contributions to the emerging literature on entrepreneurial orientation (EO). The first paper rigorously assesses and enhances the construct validity of EO—an important antecedent to empirical research. The second paper draws on the concepts of identity and social identity and provides a means of predicting how various ownership types of family firms will affect the EO–performance relationship. The third paper synthesizes multiple theoretical perspectives and empirical research to provide insights on the role that EO plays in enhancing a firm's acquisitive and experimental learning. We close with a discussion of EO as an area for theory development.

Transaction Costs and Outsourcing Decisions in Small- and Medium-Sized Family Firms

An important difference between family and nonfamily firms, and among different types of family firms, is in the way they make outsourcing decisions and thereby define the boundaries of the firm. The authors propose that transaction costs arising from human asset specificity, threats of opportunism, and risk aversion will make small- and medium-sized family firms operating with technologies of low to medium complexity less likely to outsource than comparable nonfamily firms. The authors also argue that the limiting influence of transaction costs on the outsourcing decisions of family firms may be mitigated by variations in available suppliers, goals, and ownership structures.

Toward a Theoretical Basis for Understanding the Dynamics of Strategic Performance in Family Firms

An important distinction between family and nonfamily firms and among different types of family firms is the manner in which strategy is formulated and implemented. These differences in strategic behaviors can cause variations in firm performance. Understanding the nature of these differences and how the family form of organization drives them therefore contributes to the development of a strategic management theory of the family firm, a unifying theme of the series of special issues published in Entrepreneurship Theory and Practice to date. This article briefly reflects on the progress made in understanding the strategic differences of family firms in this ongoing series and discusses the contributions of the articles and commentaries contained in this fifth special issue on theories of family enterprise.

Entrepreneurial Orientation in Family Firms

This paper addresses the connection between corporate entrepreneurship and family businesses, with a particular focus on the construct of entrepreneurial orientation (EO). The main argument is that family firms represent organizational contexts that have specific characteristics with impact on EO. The article includes a review of key literature on EO that is used to define and discuss the family firm as context for entrepreneurial activities. Key themes emerging in the literature review are the roles of culture, dualities and resources as well as the importance of distinguishing between different types of family firms. It is also argued that it is relevant to look further into how “enterprising families” that strive for trans-generational wealth creation attempt to develop and nurture a “family entrepreneurial orientation” (FEO), a construct that addresses the entrepreneurial orientation of a family unit rather than that of a business unit. The article closes with a future research agenda.